The overall trend moving away from cash and checks and moving toward cards (plastic) continues to gain with even greater momentum as recent surveys indicate. Americans are turning to debit cards as their preferred method of payment.

The survey conducted on behalf of the Pulse EFT Association found that 54.3% of Americans surveyed prefer to use their debit card. 17.7% use their credit card, 15.4% pay with cash and 12.6% still use checks.

Compared to previous 24 months

The recent change of 8.7% of American consumers switching from paying via cash to paying via debit card is attributed to the use of paycards issued by employers to their unbankable employees.

The drastic change of 6.1% in the usage of checks was caused by those individuals who could not manage their bank account. Banks require minimum balances and charge excessive fees for non-sufficient funds and overdraft protection. Instead of switching to cash, these individuals have sought out stored value debit cards or solely rely on their bank debit card.

This relatively new era in prepaid debit cards is catching on quickly, causing a major change in the way consumers prefer to pay for goods and services. Understanding consumer buying habits and payment choices in a changing world is critical for the survival of many smaller businesses.

In this report 81.4% of consumers said that merchants who are not accepting debit cards and credit cards would soon lose their business if they did not make a change. The survey also revealed that 80% of the consumers said they would be very unhappy with any merchant that started charging additional fees for the use of a credit card or debit card in their store.

Where the largest change is yet to happen

The survey shows that the group considered as the unbankable will be using some type of debit card in the near future and that by early 2008 98% of the United States consumers will no longer be using cash or checks.

There currently are several debit card providers in the stored value product market. Both MasterCard and Visa have a stored value debit card, which allow marketers to private label. Others like Pay 2, Netspend and U.S. Cash WorldCard have developed their own products and a total network. At present U.S. Cash WorldCard seems to have the strongest platform and access system. In fact, it is as strong as MasterCard or Visa making the card usable almost anywhere around the globe.

What is the difference between a bank debit card and a stored value debit card?

A bank debit card is attached directly to a checking account. People with good credit have overdraft protection that allows certain flexibility, but comes with fairly high fees and costs. The store value debit card is different. Money deposited on the card is placed in an aggregate bank account for safe keeping along with the money from thousands or millions of other cards. Through sophisticated, secured, accounting technology and software, licensed processing companies monitor in real time the activity of each and every card by account number. They record and report every transaction. When money is loaded to a card, they electronically deposit it into an aggregate bank account for safekeeping. When money is drawn from an ATM machine or a purchase is made at a P.O.S. terminal, the processor electronically transfers funds from the aggregate account to the merchant’s account and records the transactions and related fees.

Unlike setting up a bank account, anyone can obtain a stored value debit card by simply filing out a short application and proving identity. This card is truly the answer for the unbankable plus those who have a problem controlling their spending habits.

A few consumers, who are experiencing financial difficulties, prefer using a stored value debit card over their bankcard because of security and access to emergency cash. A creditor can lien a regular bank account; however, he cannot lien a aggregate account.

One third of the consumer base is ready to make the transition and has been waiting for only one key element: convenient locations where they can purchase, activate, load and continue to load their cards. With more than one third of the population waiting, the race is on with the card providers. Walmart now has its own debit card; however, it is still on a gift card platform and can only be used at Walmart and Sam’s Clubs. Netspend now has its cards being sold, activated and loaded in Ace Check Cashing centers across the nation. Many others have tried to get their cards into the market place through merchants and large retail chains, but have failed. Why did they fail? These merchants and retailers did not have the high speed internet access and technology in place at their counters to accommodate the required process for activation, loading and reloading such products.

U.S. Cash Inc, a Riverside, California based organization, was the first to come out with a total solution for merchants. At the California Financial Services convention held in May of 2004, Julie Johanning, the Senior Vice President and Chief Operations Officer of U.S. Cash Inc., was able to present her products and solutions and compare side by side to most of her competitors’ products who were in attendance there. Although each had their own uniqueness, certain features of the U.S. Cash products really stood out as an advantage.

First, the U.S. Cash WorldCard (the stored value debit card) has the same platform and access strength of MasterCard or Visa and is the strongest in the stored value product industry. Yet she did not have to pay MasterCard or Visa for their rights and their percentages. Consequently, she realizes a considerable larger profit margin. Rather than taking the extra profit, she passes them onto the consumer with lower fees, to the merchant for higher profitability and for the sales representatives bigger commissions and residuals.

Julie explained that the greatest weakness U.S. Cash has had was developing a marketing and sales team to get these cards in the hands of the merchant to sell to the consumers. Sounds like a tremendous window of opportunity for independent sales representatives to make a fortune.

Pricing at time of this study was as follows (please note: Money Gram was in the process of a rate changing; however, new rates were not available at time of print):